As a glut of new hotels continues to spring up in the San Gabriel Valley, a new survey has found that hotels in much of that area are suffering the worst decline in occupancy rates in Los Angeles County.
And the study, released last Thursday by the accounting firm of Pannell Kerr Forster, said things are likely to get even worse next year. While the supply of hotel rooms in the valley will grow substantially in 1990, they are expected to be only half-filled, which would be an 11% drop in occupancy from 1987, and a 6% drop from this year, the survey said. In contrast, Hollywood hotels are expected to be 78% occupied, and Santa Monica's probably will be 70% full.
Elsewhere in the county there already are small downturns in the hotel market, reflecting an expected 5% occupancy decline countywide, the report states. However, West Los Angeles is expected to fare well, as luxury and first-class hotels there experience a slight increase in business.
For purposes of the survey, researchers considered Pasadena, Arcadia and Monrovia separately from the rest of the San Gabriel Valley. And in those cities, the outlook was a little less grim.
Overall, though, the only good news was that San Gabriel Valley hotel rooms are among the cheapest in the county.
The survey brings unwelcome tidings to many San Gabriel Valley cities, which have been banking on booming hotel construction to bring in hefty bed and sales tax revenues. And increasingly, local innkeepers are engaging in "hotel wars" in an attempt to lure travelers with amenities like exercise facilities, Asian-influenced menus and multilingual staffs.
Still, San Gabriel Valley hotel executives said they weren't surprised by the area's low numbers, explaining that they don't expect to draw on the Southern California tourism market, which for West Los Angeles' luxury hotels translates into $276-a-night rooms and 70%-plus occupancy levels.
"We're not in the most desirable area," said Susan Barnes, sales and marketing director for the Sheraton Rosemead Hotel, which is scheduled to open in March, 1990. "People don't say, 'Let's go to the San Gabriel Valley for vacation.' "
"Who comes here unless they're coming here for business?" asked Margy Fuller, sales director for Days Inn in Diamond Bar.
Nevertheless, the dim forecast doesn't lower Barnes' expectations for the 148-room Sheraton, which she said will depend on "a strong corporate base" to make up 75% to 80% of its business.
Some hotels already are feeling stiff competition in the limited market. The 196-room Hilton Hotel in Baldwin Park, for example, had an occupancy rate of only 34.4% in September, three months after it opened. And by this month, it still hadn't hit the 50% mark.
"We're not really where we want to be, but we're hanging in there," said Sales Director Melissa Egy.
The hotel's struggles are particularly worrisome to Baldwin Park's Redevelopment Agency, which owns a 50% interest in the Hilton and is responsible for any deficits the establishment may incur.
"Obviously, it concerns us," Beverly Pearce, the city's housing and economic development director, said of the hotel survey. "We hope that what hotel business there is in the San Gabriel Valley will be attracted to the Hilton. However, we're all observing a certain amount of resistance in the marketplace, which we believed we would easily steal."
Even in the Pasadena area, known nationally as a tourist attraction for its Tournament of Roses, a significant drop in occupancy rates is expected: from 81% in 1987 to 70% next year, the survey said. This year, the report found, Pasadena-area hotels posted a 76% occupancy rate. The declining numbers, coupled with the appearance of new hotel chains competing for upscale business travelers, are keeping executives at the 20-year-old Pasadena Hilton Hotel on their toes.
After Howard Johnson and Holiday Inn opened in Monrovia, the Hilton lost some of its local business to the more moderately priced hotels, said Jim Davis, sales director. And with the addition of three more nearby--the new 350-room Doubletree Inn in Pasadena and the Residence Inn and Hampton Inn in Arcadia--the market will remain glutted with a hotel room surplus before it balances out, Davis said.
"I don't foresee the pie getting any bigger. I see the pieces getting smaller," he said.
Carolyn Wilber, senior sales manager of Embassy Suites Hotel in Arcadia, agreed. "What has happened is the industry is growing, but it hasn't grown as quickly as the number of hotel rooms. It would be nice for us if no more hotels were built."
To promote a more modern image, the Pasadena Hilton is undergoing an $11-million renovation project that includes the addition of an exercise room, increasingly an essential amenity in the competitive full-service hotel market.
"We're doing this mainly to combat Doubletree," Davis said. "You can't just sit back on your laurels these days. You have to have a strategy."